Tread warily in the real estate war of words

The good times of unfettered investment in property might be coming to an end but it may not be the nationwide bubble burst some are predicting, writes Ian Verrender.

Q. How do you tell if the property market is peaking? A. When Harry Triguboff tacks a For Sale sign on his corporate empire.

Well, not quite all of it. The octogenarian property tycoon last Thursday was afforded a front page advertisement in a major newspaper, where he invited bids for the development half of his Meriton business. The gist of the story was that all offers over $3 billion would be considered.

According to Triguboff, an unnamed Chinese developer offered him just that on a recent trip to China. And, he conceded, it just might be time to retire and let the kids live off the rent from all those apartment blocks he still owns. Odd he didn't jump at it right there.

Triguboff has his detractors. But the man who has been jamming the skyline with his ubiquitous Meriton apartments for almost six decades is no novice when it comes to a sale, and, more importantly, timing.

It was all grist for the mill in the never-ending biff between those convinced that Australian property is the greatest asset bubble known to mankind and property spruikers, cheered on by the nation's financiers, who see property prices extended forever onwards and upwards.

Tread warily, dear reader. For there is no middle ground in this bitter, decade-long war. But here goes anyway.

There is no doubt Australian property is overvalued. It is equally true the market has been distorted by tax policies - with no tax on the family home and an open slather negative gearing policy for investors - that direct funding towards housing and deplete the amount of credit available for productive areas of the economy.

The Australian banking industry, meanwhile, has an unhealthy exposure to residential mortgages in an economy increasingly reliant on the export of raw materials to largely one market. The big four banks have as close to a monopoly on home lending as is possible, with 83 per cent of all mortgages.

As at February, outstanding mortgages on residential property stood at a colossal $1.275 trillion. Most of that money was borrowed offshore by our banks - the real source of our foreign debt problem.

Unfortunately, those permabears salivating at the prospect of a spectacular unwinding, a doomsday bursting that will cause the banking system to implode and strike a terminal blow to the heart of the economy, are facing bitter disappointment.

Don't get me wrong. It is not impossible. In the volatile world in which we now live, nothing is. But it is extraordinarily unlikely.

Despite the obvious imbalances in our economy, a property meltdown such has been predicted for more than a decade could only occur if there was a catastrophic economic upheaval that caused a massive lift in unemployment, triggering widespread default.

The more probable scenario is that there will be a gradual property unwinding as experienced during 2010 when real estate came off the boil as interest rates ratcheted higher. Affordability once again is diminishing, approaching the lofty heights of 2009 of about 4.5 times average earnings.

It is worth noting, too, that for all the talk of a bubble, significant areas of Australia have yet to see any real recovery in housing prices, let alone a boom. So far, overheated property has been a feature of capital cities only. And even then, it has been confined to Sydney and to a lesser extent Melbourne, which between them house about 40 per cent of the population.

According to RP Data, the median price of Sydney dwellings rose 15.6 per cent in the year to April with Melbourne up 11.6 per cent. Brisbane, Adelaide and Perth increased a little less than 5 per cent - healthy but not exorbitant gains - with Hobart rising less than 1 per cent.

Some regional areas, such as Far North Queensland and even the lifestyle regions on the north coast of NSW either have gone backwards or seen little change, a significant difference to more recent booms that saw prices rise strongly across the nation. In Mackay, for example, almost half of all units are now sold at a loss, according to RP Data.

The most oft cited reasons for the explosion in prices in Sydney and Melbourne is a heady mixture of supply shortages, resulting from arcane and overly bureaucratic planning and approvals processes, and demand fuelled by record low interest rates and investors, including foreigners.

But already, there are signs of significant oversupply emerging in Melbourne, particularly in the CBD. And a quick look at the raw data indicates that supply nationally largely has kept pace with the rise in population.

In the 12 months to September 2013, net population grew by 405,000. During the same period, about 157,000 new dwellings were approved, more than enough to house increased demand.

With our young now being permanently priced out of some major metropolises, the push is on for a fix. The spruikers are calling for the government to provide a new round of incentives for first homebuyers. But that only distorts an already heavily distorted market.

When it comes to culprits, it is investors who bear the scorn. They now account for a record 38 per cent of new loans with first homebuyers in February accounting for just 12.5 per cent, about the lowest on record.

Given those few first buyers probably used equity courtesy of their parents' residential property, there are legitimate fears home ownership, particularly in Sydney, will become the domain of a privileged class.

The housing industry regularly issues dire warnings about any attempt to remove the tax incentives for property investment, particularly negative gearing, arguing it would result in a catastrophic slump in housing supply, ultimately pushing up prices. But the numbers simply don't support that. In fact, the opposite is true.

Property investors look for capital gain. They don't discriminate between existing or new dwellings. In fact, research indicates the massive increase in tax driven property investment has done nothing to lift housing supply with the vast bulk of investors preferring existing property over new developments.

Then there are foreign investors. Supposedly limited to buying only new dwellings, there is plenty of anecdotal evidence that non residents have been flaunting the rules. But the Foreign Investment Review Board (FIRB) provides almost no data on how it polices its own regime. Even its basic data on the level of foreign investment is hopelessly out of date.

With our young now being permanently priced out of some major metropolises, the push is on for a fix. The spruikers are calling for the government to provide a new round of incentives for first homebuyers. But that only distorts an already heavily distorted market.

The $20,000 or whatever figure is provided merely pushes up the price by that amount, making the grant a gift to vendors rather than buyers.

If Joe Hockey wants to create a more affordable housing market and increase his tax take in the next Budget, he could start by limiting negative gearing on property to new developments only. That would take the heat out of the Sydney market by reducing demand for existing housing and boosting the supply of new stock.

And it is time he insisted the FIRB enforced its own rules, to ensure the integrity of our investment policies and help arrest the lopsided boom that has sent some capital city prices into the stratosphere.

Even Harry Triguboff can see the good times of unfettered investment in property may be coming to an end.

Ian Verrender is the ABC's business editor. View his full profile here.

Comments (183)

Comments for this story are closed.

chalkie:

21 Apr 2014 9:07:33am

Could the title be instead: 'Foreigners really ARE to blame for our housing unaffordability'?

By all means, this has been at everyone's long-term connivance, with both federal parties eager to have the faux growth figures resulting from greater sprawl, catch-up infrastructure splurges and house price inflation boosting (debt-fuelled) consumer spending. Foreign buyers are just the latest instance of this problem: the real culprit has been our excessive immigration.

So now the chooks have come home to roost in their over-priced boxes: the Boomers have sold out their young for short term benefits and no one is game to kick the bad habits of the past because the short term pain will be immense and the beneficiaries will just be the Gen Xers and mostly the Gen Ys - and who really cares about them?

Algernon:

21 Apr 2014 9:50:36am

Chalkie, in places like Sydney and Melbourne, foreign buyers make up 1:5 of all property purchases. In some unit developments they are almost exclusively foreign bought. Much of the foreign investment is little more than money laundering.

I have three Gen Y kids, I wonder how they will be able to afford housing with this onslaught of under the table money. Bring on the collapse of the housing market.

JohnC:

21 Apr 2014 10:30:55am

@Algernon:Bring on the collapse of the housing market? Unfortunately that would be to the detriment of the Gen Y kids as it would impact on the banks which in turn would severely impact the business sector and see unemployment soar through the roof. We have to hope that Ian Verrrender is right and that there will a significant but not bubble bursting impact on the upper end of the housing market, particularly in Melbourne and Sydney. There is no doubt that certain sectors of the market are overheated and the aim should be to let the air out of the tyres slowly.

JohnC:

21 Apr 2014 11:26:08am

@aGuy:If unemployment took off in Australia as happened in the USA after the property bubble burst a significant number of the Gen Y population would be in a position of no job and no income. Can't see how that would benefit their home ownership aspirations.

aGuy:

21 Apr 2014 11:45:08am

Since when was housing price the precursor to employment?

The free cash that use to be spent on accommodation would likely be spent on service industries. The service industries (retail, catering etc) are the only ones that hire a large portion of young people.

With the current numbers of uni re-entrants and youth unemployment, your prediction of unemployment in many ways has already occurred, courtesy of 457 visas and off-shoring.

rod:

21 Apr 2014 11:35:18pm

Now that sounds like a comment from someone who has a bit of faux wealth bound up in property. House owning Australians need to take a great big cold shower, for there's not the tiniest whit of anything any of you can do to forestall the forthcoming plunge towards near worthlessness your wretched property prices will undergo.

And, for a nation that cares more about its wretched property prices than the education of its children, I couldn't think of a juster dessert for you all.

Geoff Walker:

22 Apr 2014 9:27:43am

Yes!As we glide into third world status, those who have bought real estate with the idea that it will always rise in value; that they will have permanent jobs and that interest rates will always be low, will find themselves in the gutter. Sydney has the world's highest house value IN THE WORLD as calculated by multiples of average income. As Asians gobble up houses and units, home seeking home grown Aussies will become tenants or live with their parents.

Blzbob:

21 Apr 2014 12:01:08pm

I hope property prices do crash.

I already own my own home, but I have no intention of trying to sell it for an obscene profit.

A crash will hurt those with a number of "investment" properties, not people who have bought or are buying for somewhere to live. Some may have bought at too higher price, but that is the choice you make when you decide to out bid other bidders, and it is usually the "investors" that can afford to bid the highest, they then leave themselves with most to lose, and I have no sympathy for them.

There is nothing I would like more than to see more of our younger generation be able to afford to purchase their own homes. Being a slave to a greedy landlords and property investors extravagances is nothing to aspire to.

Some people are greedy all their working lives and then still aren't satisfied when they reach retirement.

Nick:

21 Apr 2014 1:02:14pm

Sounds like a bit of envy when you say you want to see people "hurt" because they have more than you.Investors stimulate the economy whichever way you look at it.The problem with house prices is availabilty which is being hampered by too much influence from the green lobby who oppose development which is badly needed.

filosofoeduardo:

21 Apr 2014 6:11:39pm

So... although evidence that comes from reading the above article, stating that "the 12 months to September 2013, net population grew by 405,000. During the same period, about 157,000 new dwellings were approved, more than enough to house increased demand", suggests something other than what your statement here, which also occurs in the context of a monetaristic neoliberal economic system hugely biased toward capital the world over, using real estate as a subject of speculative investment (see Italy, Spain, etc), with a particularly strong additional bias toward capital and influence in Australia held by the construction and "property development" lobby, and this lobby's access to politicians' doors and its intertwined relationships with the banking and finance industry, all fed through an umbillical cord attached to the Chinese economy, which returns the favour through Chinese investment in property here... you think everything has to do with the influence of greens policy, achieved through its access to 0.000001 percent of capital.

Please: read about how the world works; its more useful for all than just exposing some personal grudge.

Noah's Ark:

21 Apr 2014 7:44:32pm

Nick . Its common sense over Greed.

Investors only stimulate a selected and narrow end of the economy and even then it is limited. It benefits only those consumers/ investors (foreign or otherwise) who can afford it.Investors distort the economy. They do little if nothing for the ordinary Australian and rely on a continuation of the obscene negative gearing coupled with the Housing Bubble. The Housing Bubble that so many are bending over backwards to deny.

The governments are scared about repealing negative gearing as it could/maybe result in somewhat of a voter backlash amongst the investor class and every vote counts.. However the repeal of negative gearing would then stand Australia in a much more stable and affordable economic environment where once more you would have a much more affordable housing situation leading to a revitalisation in the consumer. Especially those who have not bought into the current property market as the current situation favours investors at the expense of first home buyers. This has been well documented and is in all the stats concerning real estate It is a real trend which the housing bubble supports to the exclusion of common sense and a more well adjusted property market.

With a more reasonable market consumers at large ( the average Australian citizen) would have more disposable income, have a hell of a lot less stress and many of those who face ridiculously high rents could buy into the housing market thus freeing up the rental property market which in turn would force rents downward. So it would be a WinWin situation for all excepting the some in the real estate industry and investors. But why should the Australian taxpayers support investors through the operation of negative gearing? It's a bad joke and needs to be removed ASAP.

chipinga:

Blzbob:

21 Apr 2014 11:34:11pm

It will be devastating for real estate agents.They might have to go out and get a real job and do some real work. They will probably just turn to doing something illegal rather than real work to suck more money out of the economy.

Zany:

Shane:

21 Apr 2014 4:35:16pm

Couldn't agree more with your statement regarding forgiven investment .One thing to consider though ,one sad ,ironic fact is that my parents (boomers)are property investors and I can't afford to pay the rent in one of their houses that they want to charge me. They bought up a heap of properties real cheap in the 90s in my local area and I can't afford to live in any of them now,and with their capital gain expectations buying one is fantasy land.My dad owes Johnny Howard a big Thank you for negative gearing.Im moving to france where houses are reasonably priced and before I build up any more resentment toward the boomer generation for stealing the dream of home ownership from their children.And yes I would very much to like to see the housing market collapse in Australia.

Noah's Ark:

21 Apr 2014 9:12:17pm

One of my brothers once said to another of my brothers "That Howard made a lot of people wealthy overnight including himself". The other brother pointed out it was only on paper and that in reality he had not really gained anything. That brother pointed out that if you sell your house you are no better off if you wish to buy another property as you have to meet the overpriced value (housing bubble) of a new or replacement property. You have gone nowhere but treading water. The real "Negative" effect was however that it put those who up until then had not purchased a property at a distinct disadvantage that has existed since the Howard years to currently.

I believe it is parasitical on society and selective by Howard who cared not for the well being of the nation as a whole but as a means to buy votes.

Howard was no more than a opportunist Neo Conservative ideologue who cared nothing for long term consequences as he sought to justify any negatives by putting all blame and/or distractions onto the progressives.

RC:

21 Apr 2014 11:13:49am

Who are the "foreigners"?Are the conglomerate cartels with "citizenship" in every country, including ours, wherever they have subsidiaries, included under that heading?What of the Banks, and various Religions - are they patriotic Ozzie "citizens", too? Housing is a business category, and its marketing is controlled so that these legitimate "citizens" may reap the greatest profit for stock and share holders.A conditional and false shortage is purposefully created for that objective end result.The same is true for Fuel, Metals, and other Ores, Foodstuffs, etc.,etc..Most of my generation immigrated here within the last 50 years, are we those "nasty foreigners", you pillory?Bulldust like this is designed to hoodwink "us", so that legitimately sought after targets may be reached, all the easier.The Quid proves the Quo, within "our" Common Wealth.

OverIt:

21 Apr 2014 11:48:29am

RC, I think Algernon is referring to the large numbers of foreign buyers who are neither Australian citizens nor residents of Australia. Their permanent residence is overseas, most commonly China, and since the 2012 state budget, buyers can own multiple homes in their country of origin and still apply for a grant to purchase Australian properties.

An overseas buyer is permitted to apply for 20 x $5,000 grants if they choose to buy 20 off the plan apartments. An Australian buyer is only permitted one grant.

A foreign investor doesn't have to live in their investment property/ies. All they have to do is apply through the foreign investment review board to buy.

Algernon:

21 Apr 2014 12:01:52pm

Correct Overit.

I have no issue with those who may have been born overseas and now live here purchasing anything. However, those using their under the table money to purchase property, benefiting from grants and never living in this country, then inflating the cost of housing well I object to that.

basel:

21 Apr 2014 6:26:19pm

Algernon, the problem here is not foreign people who have a much greater propensity to save than many of us. The problem is, and always has been, negative gearing. It enables people with money to avoid tax. And as we are seeing, it does this with no good outcome. It doesn?t do things like increase the supply of housing for cash strapped young people.

Algernon:

21 Apr 2014 11:51:56am

Come to my area RC, they are almost entirely Chinese (foreign national not Australian Chinese) with developments being exclusively being targeted at them. Actually looked to investing in one of these developments and was discriminated against purchasing. Go to some of the auctions and watch them pay well over the odds.

Algernon:

Algernon:

21 Apr 2014 9:08:54am

Recently we looked at a new home unit development just down the road from us. We'd pre registered and were told we'd be notified when the first two stages were to be released. Heard nothing only to see these units were to be on sale that weekend. We went to have a look. We asked why we weren't told, they mumbled something indecipherable and pointed us to the show room. There we looked at the development and eventually a unit salesperson, a spiv more interested in his emails spoke to us. He didn't like the look of us, wrong colour, blow the fact that we could pay cash for one of these units being sold off the plan. What became apparent was they were only interested in Chinese buyers. To even get a look in $5000 needed to be paid to be a VIP customer. Chinese friend point out that the money is coming from China, they call it under the table money.

Frankly I'd like to see the price of housing collapse in Sydney. Where I live it now costs 15x average annual salary to buy a house and unit under $500k well forget it. When we fist moved here 22 years ago it cost a little over 3x. I'd also like to see the blockage of foreign nationals being able to purchase residential property. Were else in the world are they able to do the same.

Sea Monster :

Algernon:

21 Apr 2014 11:21:40am

Point out what housing markets in the world Australians are allowed to invest in their own name, Sea Monster outside New Zealand. Oh and on the super it may just depend how you put you portfolio together.

Sea Monster :

21 Apr 2014 12:22:48pm

Why is the legal form so important? I don't get the significance of in own name. If you own it through a company or super you still own it.

As far as I know there are no restrictions on foreigners owning German real estate. Please enlighten me if you know different. In the US the regulations is state by state. Those states that do restrict tend to focus on agricultural land. I think there are no restrictions in the UK with Russian oligarchs driving up desirable London suburbs.

Stuffed Olive:

21 Apr 2014 2:17:53pm

This is about housing Sea Monster. I think you're off the track by a long way. You only own a house or something if you have the title to it. I do not own a thing by virtue of where the super funds are invested and I don't think the super funds own it either.

Algernon:

Sea Monster:

22 Apr 2014 7:36:13am

If I own a company that owns property and the company can enforce its ownership then I effectively own the property. In any case its moot. It seems its quiet common that I can own foreign real estate in my own name.

AE:

Blzbob:

21 Apr 2014 12:07:29pm

Personally I think we should be a little more nationalist, and no one should be able to own property in Australia unless first becoming an Australian citizen.You shouldn't sell your land to foreigners no matter how many glass beads or axes they offer you.

Sea Monster :

willg:

21 Apr 2014 1:47:11pm

Sea Monster,So it's acceptable that Chinese nationals and companies by land here without intending to live, but Australians can NOT buy land in China, even if we moved there? And if we moved to stop them buying land we'd be racist? But they are not? This is how I understand your viewpoint from your posts. How do you explain that position?

Sea Monster:

Blzbob:

21 Apr 2014 11:42:55pm

Sea Monster You obviously prefer multinationalism, as it allows you to "chase the superior return overseas", and rob the less fortunate in overseas countries, so you have the cash to bring back and set up schemes to rob the less fortunate in this country.

OverIt:

22 Apr 2014 8:12:26am

Exactly, Blzbob. There is no reason for a foreign national to want to own property in Australia other than for financial gain and this comes at the cost of housing affordability to our own people. As for anyone other than Australian citizens being eligible for a grant to buy property, whoever decided on that little gem is greatly abusing NSW taxpayers' money.

AE:

22 Apr 2014 8:44:17am

By your logic, nobody should be allowed to invest in anything because it drives up the price of things. You could say that rich people buying food drives up the price of food for the poor guy, so the rich guy shouldn't be allowed to buy it. Yeah, let's make that rich guy grow his own food. He's probably got lots of free time anyway because he doesn't need to work because he is collecting rent (robbing) from his fellow citizens.

OverIt:

22 Apr 2014 9:31:02am

"By your logic, nobody should be allowed to invest in anything because it drives up the price of things. "

Nobody? You seem to have misunderstood what I believed to be a very straightforward statement. Don't you also think we are foolish to allow non-Australians to invest in housing to the extent that many Australians are priced out of the housing market in their own country? Or are you OK with that? Most other countries in the world prefer to protect the interests of their own citizens in this regard. I'm just wondering why we're not one of them. And why you're not.

RC:

21 Apr 2014 2:29:18pm

What or who is a "corporate citizen", is the crux of the matter, Algernon?Is their place of birth included within that status?An employee of a corporate citizen may hail from Latin America and look Eastern Asian, I'm sure, and buy anything here at will upon due authority of that corp. citizen.Such prejudicial labelling is bigotry, and is "ours" to own up to.Its what keeps law abiding "new" immigrant ex-pat Kiwis awaiting "authority" after 10 years "resident" and working here to apply for "permanent residency", and several further years for "authority" to allow them to apply to become "citizens".Some weird ANZAC spirit we have. A corporate conglomerate or a petty bourgeoise from anywhere may "buy" "citizenship" upon arrival here, and you are right, "no questions asked".This gratuity is afforded anyone with the money, no matter whether they are criminal or good global persons.This state of affairs needs to be the object of an Auditor General "enquiry" in order to end such inequality within our Law regardless of wealth.If anyone should be afforded immediate "citizenship" it surely should be the Kiwis who want to become Ozzies.It afterall is their "right" under the more than 30 years old CER Treaty between our two States.

TJ:

21 Apr 2014 9:24:33am

A lot of Chinese investors have to get their "under the table" cash money out of China as the government has started to clamp down on corruption and tax avoidance via modern methods which highlight undue riches. Look forward to a continuing influx of Chinese money until somewhere else in the world offers them a better deal OR the Australian government changes the rules.

kenj:

"Canadian Finance Minister Jim Flaherty on February 11 announced that a 28-year-old visa scheme designed to attract wealthy foreigners to the country would be axed, effective immediately.

Under the now defunct Immigrant Investor Program, as long as you had a cool $C1.6 million ($1.6 million) in net assets, then all you needed to do was lend the Canadian government $C800,000 for five years on an interest-free basis and you were assured permanent residency for you and your family and a fast-track to citizenship.

The decision raised some eyebrows, not least because preceding the decision there had been growing chatter that the country?s already expensive housing market was being inflated even further by a wave of wealthy Chinese entrants into the country, and in Vancouver in particular.

At the time the immigration scheme was axed, there was a backlog of 65,000 applicants, of which 45,500 were mainland Chinese ? and 80 per cent of those were bound for the province of British Columbia, according to analysis by the South China Morning Post."

So now they are coming here to protect their wealth, and ideally, to get residency and citizenship. Sydney beats Shanghai any day.

Polly Wolly Doodle:

21 Apr 2014 9:27:40am

Timely article, Ian, but there is little hope that Joe Hockey will do other than exactly what the powerful lobbying industry players want him to do. And he is unlikely to adjust the current situation which does see home ownership among younger Australians, remain the domain of 'a privileged' few. The age of entitlement is here to stay...for some.

As you state.."The housing industry regularly issues dire warnings about any attempt to remove the tax incentives for property investment, particularly negative gearing, arguing it would result in a catastrophic slump in housing supply, ultimately pushing up prices. But the numbers simply don't support that. In fact, the opposite is true". But Ian, Joe will give industry groups what they want. Did they not put him there?

But do you really think Joe is concerned? Would he really limit negative gearing? He added to budgetary pressure by winding back provisions the previous government placed on Fringe Benefits. Was he beholden to a lobby group? (the novated car lease finance industry lobby?) . Let us be realistic, he is only going to address any budgetary pressure, real or manufactured, by targeting those who can least afford his negative attention.

Amarok:

JaneS:

21 Apr 2014 8:23:07pm

Perhaps you can point out where PWD made any reference to who implemented negative gearing. The thrust of PWD's comments is that the current Treasurer is unlikely to take any actions which would limit negative gearing

PWD is well within his/her rights in disparaging posters with poor reading comprehension

md:

Peter, there was no catastrophe when negative gearing was quarantined - there was just pressure from the REIA, claiming that it WOULD be catastrophic.

I suggest you read http://www.smh.com.au/articles/2003/08/24/1061663676588.html?from=storyrhs

"The estate agents predicted that ending negative gearing would have dire consequences for renters, and they really stepped up their claims of disaster in the federal election campaign of July 1987.

They managed to win the support of the Labor governments of NSW, Victoria and Western Australia, and they put the frighteners on Bob Hawke to the point where, in just the last week of the campaign, he agreed to re-examine the issue."

Aussie Sutra:

Stuffed Olive:

22 Apr 2014 9:24:49am

Keating did not start it - it has been around for a long time but as a drain on revenue it was having a huge effect by the 1980s. Abolishing it was not a catastrophe at all - Keating caved in to the whingers and reinstated it.

Graham H:

21 Apr 2014 9:28:08am

There's a couple of myths that people always raise about property markets and taxes.

Ive invested for past 30 years in existing property. And built new.

One is negative gearing. For anyone who decides to buy just because of negative gearing - beware. For one - it does not last long and two, with interest rates at around 6% for borrowing its now not much advantage anyway.

In the 1990's when rates were 17% - it worked. Especially if every 2 or 3 years you bought additional property before prices rose.But do remember - for all that tax advantage you get - there is still the rather large problem of paying the actual loan off. A poor paying tenant can bring you undone very quickly.

If you buy just one or two houses - as you pay off the loan - and as rent increases- the negative becomes positive and you pay tax anyway. With interest rates so low under Abbott - its not likely any houses are now negative geared. ie The interest and other expense would not be more than the rent income.

The other is capital gains tax. I have friends telling me now if they sell their $600,000 investment property - they may be upfor say 100,000 in CG tax. So what they do is they don't sell. They borrow against the value - and buy again.Capital Gains tax - is therefore actually a major culprit in not freeing up housing for sale. And in keeping prices high.

If Govt ditched negative gearing - and called a one year Capital gains tax exemption - you might see houses prices fall dramatically as sales would be huge as investors tried to cash in. Stamp duty collection would sky rocket. And maybe stock and banking cash as investments would soar as previous housing investors went elsewhere.

Algernon:

21 Apr 2014 9:56:45am

Actually Graham Interest rates were only at 17% until March of 1990. By the end of that year they were 15%, 1991 12%, 1992 10%. The reality is that Interest rates were double digit for all of the 1980's. That said though. your points are valid.

OverIt:

21 Apr 2014 11:34:37am

Capital gains tax is based on the difference between the price paid and the price at which a property is sold. Therefore, if your friends are up for $100,000 CGT, then they will have to have made a darn sight more than that in capital gain.

Yes, the tax is high, but it seems like your friends haven't done too badly themselves out of their investment. And they would have been aware of CGT at the time they made their investment.

They do realise that by holding on to the property and waiting for its value to increase further, they will be liable for an even greater amount of CGT when they eventually do sell?

Greeny:

21 Apr 2014 12:32:08pm

They're not going to sell though. They'll borrow against the equity to buy more property, then negative gear the interest payments. What a great system... if you already own 2 or 3 investment properties outright

SJJM:

21 Apr 2014 8:09:50pm

The system aint that great. Negative gearing still means you have to make a loss on a property to benefit from it, and with interest rates the way they are, the loses through interest repayments aren't that substantial. It is only after having our investment for 10 years that things are looking up and we are nearing positive gearing.

Aussie Sutra:

22 Apr 2014 6:46:29am

With negative gearing, the best way to make a loss is to not rent out the property at all. All you have to do is CLAIM you tried to rent it out. Negative gearing in a market where house prices are going up ensures property remains off the rental market.

Dean.Collins:

Agree with you there, everyone running around saying they made a motza on capital gains is kidding themselves, they've barely kept up with inflation by the time you back out costs.

I'd love it if the government charged me capital gains....as long as it was on the true value I made and not the "induced inflation" that we are being screwed by those seeking to get elected by showing "good growth" even though its really just rampant inflation.

Martin:

21 Apr 2014 1:32:37pm

All increases in the value of an asset without improvement is inflation. If ten people want a house, artwork or car and are willing to bid above it's last sold value plus improvements then that is inflation. It is not growth. It is clearly money for nothing. It is the type of "entitlement" that the federal government would be reviewing.

AE:

21 Apr 2014 8:34:24pm

Define "tax avoider". If it's just someone seeking to pay the minimum they legally can, then there's nothing wrong wit that. Or do you voluntarily pay more tax than you need to? Do you refuse a tax refund?

Blzbob:

AE:

22 Apr 2014 8:48:51am

If you pay more tax than you need to then that's your problem. This site has so many liars boasting about how they'd be happy to pay more tax, it is really is quite amazing. Because on the other hand, so many people here complain about how tough economically it is for them or theirs. And yet, many also claim that they'd be happy hand over more to the government. That would appear to be quite contradictory, but anyway.....

Graham H:

PW:

"If Govt ditched negative gearing - and called a one year Capital gains tax exemption - you might see houses prices fall dramatically as sales would be huge as investors tried to cash in"

You said earlier in your post that NG isn't achieving much in the current low interest rate climate, so by the same token abolishing it won't seriously hurt existing established property investors, who will merely have to do some reorganising of loans, and hence they will have no need to sell (and incur Capital Gains Tax).

What I believe would happen is that gradually, new players would be shut out of the rental property market, with better investments being available elsewhere, eg the sharemarket. This would eventually lead to a rental property shortage. It may or may not lead to a flattening of house prices overall, but I would expect it to be minor at most. The biggest impact would be to rents and rental availability. Rents would have to match the cost of ownership, which they don't do now. Otherwise owning a rental property would be tantamount to flushing $50 notes down the toilet. So in my opinion by stopping NG you would be in effect hammering renters with reduced rental property availability and higher rents.

CJB22:

21 Apr 2014 2:48:54pm

That would not apply if negative gearing was ONLY allowed for new rental investment. It would in fact boost new apartment construction built by investors. Also a lot of those currently renting would be able to afford to buy therefor decreasing the demand for rental properties. Our society would be far better off with more home owners and fewer renters.

CJB22:

21 Apr 2014 2:45:13pm

Typical views expressed by somebody who has made money out of the existing scheme which, by the rules set out by the government, only benefits those in the game and leaves the rest out of the "home" market. Buying an existing dwelling and renting it out should not be called investment, it should be called inflationary spending. The term investment should only be applied to spending that increases the productive capacity of an economy. At least buying a new "investment" property increases the supply of housing and generates employment during its construction. Both of which are a good thing for the economy.Throw in the redirection of finite local finance away from productive investment in business that actually generates jobs and you have a problem that is policy driven.The way the real estate market is in Australia and the government policies that influence it is only going to increase the gap between home owners and the rest. Three things that are highly desirable for a more stable country, full employment, stable families and home ownership. Negative gearing hurts 2 of those; home ownership and full employment (as fewer jobs are created by inflationary investment which does nothing to generate jobs).

Peter the Lawyer:

21 Apr 2014 8:53:32pm

What rubbish. The word investment has an ordinary meaning and it merely means to earn a return (in income and/or capital) from an initial outlay of capital. Whether the income or capital gain is achieved by inflation or not is irrelevant. Maybe what you mean is that there are what you would call 'ethical investments' as opposed to 'unethical investments.'

The point is that you develop an argument by using the language accurately and by use of qualifyers rather than by trying to redefine understood terms.

As was mentioned above, negative gearing of real property is much less prevalent when interest rates are low. So I doubt that housing finance is crowding out business finance.

But government borrowing does crowd out private enterprise from the market.

rattan:

BushMark:

21 Apr 2014 9:41:15am

Incentive $20,000 profit to the vendors, rubbish !? As a builder the competition in our industry is far to strong to put on any excess profit, especially when our economy is struggling like I have never seen before.Who is stimulating who? $20,000 stimulates the average new home owner to spend say $385,000. Within twelve months the Government has received back GST of $35,000. ie; $15,000 profit on the $20,000 investment. Granted money is circulating. Not a bad little profit in their books!

Evan:

Nova4avr:

21 Apr 2014 9:43:49am

It is often that Govt. policy is to blame for a lot of the housing price explosion. Negative Gearing is certainly one example & another is the changes to Capital Gains Tax, which the Howard Govt. reduced in the early 2000's.

If the current Govt. are serious about debt in this country then both these tax rorts need to be fixed & fixed in this coming budget.

Providing higher first home buyer grants will only add fuel to the fire, by immediately inflating the selling price by the same amount as the grant.

We should also immediately ban all foreign buyers from buying housing.

Peter the Lawyer:

21 Apr 2014 9:02:43pm

I wonder if you even know what negative gearing is or how the tax sytem actually works.

There is no rort.

To get rid of the deduction of interest on real property you have to introduce complex legislation. No such legislation was introduced to allow those deductions. They are claimable under the normal principles of income tax law. SO they are hardly a rort.

rattan:

Jenny Ye:

21 Apr 2014 9:44:56am

Many countries especially developing countries are also suffering from the same situation the article introduced. The overvalued house price is, of course, not the feature of a healthy sustainable national economy. I believe this is mainly because of the disequilibrium of the supply and demand of houses. As the article emphasized, the explosion in house market is only so severe in large cities including Sydney. The overpopulation in these areas is not only because of citizens moving out from countryside to seek for job opportunities, but also beacause of the high amount of international immigrants who went to these big cities in search of better education and social welfare. But the disequilibrium will finally disappear due to the increase of supply and decrease of demand which will break the bubble at some point.

ram:

21 Apr 2014 9:46:47am

I lived through the real-estate crash in Texas. Prices were not even as inflated as in California, but when they crashed real-estate lost 95% of its value. You read it right, houses were going for less than 5 cents on the dollar. When real-estate crashes it does it suddenly.

There are some warning signs, however, all which are flashing red in Australia:

* An increasing percentage of mortgages are in default. The percentage in technical default is in excess of 10%, perhaps as high as 25%.

* The volume of sales slows down till very few properties are actually changing ownership. Return of property to the banks, or interbank exchanges don't count.

* Unemployment is high and rising.

* Taxes are rising further squeezing businesses to lay off staff and consumers to slow spending.

In the Texas case, real-estate prices hit a peak, then sagged about 10% for one quarter, volume almost stopped, and then prices were down 95% by the next quarter. Real-estate became a cash business. Mortgages became unavailable (the banks folded too), and it stayed that way for years. Buildings were being chopped up and torn down and sold for their scrap value. Many of the buildings were relatively new. Many had never been occupied.

paul:

21 Apr 2014 10:22:54am

So many people over the last 20 years have tried to come up with facts and figures to predict / support a the house price crash scenario in Australia - but each time they have proven to be completely wrong. The market is simply not rational and too hard to predict - but if you keep trying to predict the doomsday event I'm sure you'll eventually get it right - just might take you another 10-20 years

paul:

21 Apr 2014 6:23:34pm

I'm renting at the moment and I'm very comfortable with the landlord taking the risk - if the landlord loses money in a crash or makes a motza then that's not my concern - I still have a signed lease and a roof over my head.

Alfie:

md:

21 Apr 2014 1:16:55pm

Paul, you are so right. Every time we think that prices just cannot go any higher when you look at fundamentals, the government finds new ways to keep the bubble growing bigger.

Rudd's policy of relaxing the laws on foreign investment, and allowing the FIRB to turn a blind eye to Chinese investors openly flouting the laws by buying up multiple established properties, and pricing out Australians from homeownership is something we could never have predicted would happen. Whoever could have predicted that preferential treatment would be given not only to foreigners, but also to local investors, leveraging their bloated SMSF's to buy up multiple properties - also outpricing would-be homeowners? Whoever could have predicted that a combination of government policies would have made housing unaffordable to anyone, unless they had a huge helping hand from family?

Every so often the words "affordable housing" come up amongst government discussions. But to make housing affordable means allowing prices to fall, and not just by a few percent - house prices need to fall at least 40% - and the government won't even let prices fall at all, let alone by 40%.

As stupid as they are, they are also far more powerful than we individuals, and as we have seen, their policies have distorted not only the housing bubble but the whole economy. And given that real estate is a massive chunk of the economy - it will take priority over anything else.

Algernon:

Aussie Sutra:

22 Apr 2014 6:58:45am

You can do that here too and the results are similar. Less than half of the states in the US allow mortgage holders to "walk away", and for those that do, they are usually sent bankrupt by the bill they get from the IRS once the bank sells off the house, as the value of the property is added to their taxable income. To walk away from a mortgage on Australia or the US means bankruptcy.

Algernon:

Arthur:

21 Apr 2014 3:36:30pm

Onya Ram. Has anyone looked out of an airplane window at night coming into any big city?Think! How are these ill-concieved sprawls going to be sustained when the price of petrol goes up and the availibility goes down?Oh. You think that the price of fuel is going to collapse any any moment now do you? Wanna bet?We convert 10 units of oil energy into 1 unit of food energy. So just how are we going to feed all these people living in their stranded assets?Urban sprawl is the biggest waste of rescources in human history.We will be living in the future, not in the present. Things will change- absolutely.

Vilnir:

My personal belief is that we won't move toward houses being owned by the ordinary people who live in them unless we:

Get rid of the "first" homebuyers grants (all incarnations of them).

Get rid of negative gearing tax deduction schemes, and other such investment incentives.

Count the "primary" dwelling in asset tests (with the value thresholds of asset tests accounting for the idea that people dwelling in a {normal value} house that they own should also be eligible for gov programs).

Combined with that we also need to move away from a culture of private debt (is it really reasonable to take on an interest bearing debt with a 30 year term?). As people stretching to borrow a little bit more rather than paying with what they have drives up prices (and not just of housing).

Rapid and continuous turnover (sale / resale) of assets, and the inevitable concentration of wealth towards people who buy/sell more efficiently (pro investors) does not equal productivity, nor is it a "healthy" economy to live in, (you don't really want to live in a society where normal people owe a portion of their wage to their land lord do you?).

Moving away from an investment dominated real estate market would need to be done firmly, relentlessly, but also gently. Cutting the above mentioned gov interferences off in one big tantrum-like hit could cause very energetic and negative consequences (collapse, spike, propagation of "economic shock" to other sectors, etc).

I believe moving toward a real estate market dominated by people buying houses for themselves (and their own families) to live in would be a good economic goal for this generation of australians.

My guess is that it would take a generation of flat, or low, real estate price growth in australia for wages to catch up and make houses affordable (without long term debt) to normal australians.

James Murphy:

21 Apr 2014 6:34:19pm

So, the way you write it, you appear to believe that, in the majority of cases, houses aren't "...owned by the ordinary people who live in them...". Have you actually made any effort to look at the ownership vs rental figures in Australia, or are you one of those people who like to play victim when you see other people have something you don't?

In France, where they have a very high percentage of renters vs owners, there are laws which very much favour the tenant, not the landlord (assuming a standard legal contract). People cannot be evicted in winter. People cannot be evicted without a lot of legal proceedings (can take 1-2 years to evict someone just for non-payment of rent), and tenants are not allowed to pay more than 33% of their income as rent. This all makes owners very wary when looking for tenants (they really do look at that 33% limit very closely), but demand is strong, and places do not stay vacant for long.

French rental properties used as short term 'holiday' rentals are illegal without proper registration, fees, and permits, and the government keeps threatening to crack down on this by imposing massive fines they already have in place, but they are yet to do so in a serious way. The argument is that these properties are not available for French people who should have priority. The lack of enforcement is probably because tourism is such a big money maker in a country where, like Australia, manufacturing is on the decline (despite having a Minister for Re-industrialisation - but no dedicated Science minister...)

Property in parts of France is insanely expensive though, but demand very much exceeds supply, and, in somewhere like central Paris where building restrictions (and other limits) prevent anything happening (6 storey limit, even if you could manage to find any land to build on).

The French version of the 1st homeowners grant is a long term reduction of interest rates on the loan, rather than a cash bonus.

Chodley Wontok:

FIRB is an utter waste of space and speculation is openly encouraged, while being funded by offshore borrowings through a banking system than can do little butu fund real estate speculation.

It would be nice to think the government and RBA can craft away out of this......but a crash - as painful as that will be - is the only way out from here, and our current political leadership is in barefaced denial about the whole issue of real estate.

Algernon:

Sea Monster :

21 Apr 2014 12:45:45pm

I'm not making a prediction I'm addressing a concern raised by the author. I'm not saying it will happen, I'm saying why it shouldn't worry us (unless one has fragilised oneself with debt). A lot of Americans got rich off Japanese fueled asset bubbles.

If you want my advice though, don't expose yourself to potential bubbles. Don't go into debt to buy property. Note my advice doesn't rely on prediction. Not saying it will happen just saying how to avoid exposure if it does happen.

md:

21 Apr 2014 4:07:25pm

Sea Monster, you are making the assumption that if and when the Chinese bubble bursts, the Chinese will sell back property to Australians. I'm not so sure that would happen. In fact, I'm not sure of anything any more but the one thing I am sure of is that our government, no matter who is in power, will do anything and everything to keep our housing bubble going.

Even if the Chinese property bubble bursts, if people get hurt by it, they could simply pack up and move here. Many Chinese have property here already as a first step to Australian citizenship. We are already seeing Chinese owners of Australian farmland demanding that they bring their own workers here, and I am sure our government will bend over backwards so as not to offend them.

The situation now is vastly different from when the Japanese were buying in the 80s. Back then, a unit development had to sell half its units to Australians - now we have whole blocks of apartments marketed and sold off to Chinese; in fact the developers of many of them are also Chinese.

Secondly, with the internet now, there are websites devoted wholly to Chinese being able to look at and purchase Australian property online. We now have real estate agents and banks set up in China to help them buy Australian property.

And thirdly, there is so much corruption in China, that many people, even on official salaries of $10,000 are somehow able to buy millions of dollars worth of property here. Don't ask me how, but they do it. And our govt doesn't care how the money was obtained; they only care that the bubble is propped up.

Mervo:

21 Apr 2014 10:53:02am

We really do need to collect more taxes as a nation. For decades we have seen wannabe governments offer personal and company tax cuts repeatedly. Now the planned cancellation of the Resources Tax and the Emissions 'tax'. It just can't go on if we want any decent services and infrastructure. We have one of the lowest rates of taxation in the developed world and we now need to sell public assets, it is claimed, to pay for services. Public Health services, public education and even pensions that the elderly earned decades ago continue to eroded. Further, almost no funds are going into rail and public transport. It is time to raise taxes! Reducing the rate of tax write offs for real estate is just a start. It would also have the benefit of making homes more affordable for first home buyers and young folk starting out.

John51:

21 Apr 2014 11:29:53am

"Don't get me wrong. It is not impossible. In the volatile world in which we now live, nothing is. But it is extraordinarily unlikely".

Weren?t those the same words spoken in reply to the few economists who were saying the same sort of things about the global economy being over-inflated before the GFC? And what is even more devoid of reality is the argument that the problem with housing prices is the lack of land available for housing.

There is actually plenty of land owned by developers and or available on the fringes of our major cities. But there are many reasons for the failure to develop this land other than the excuse that there is not enough of it.

For a start you need to create a market for your product. Second you need infrastructure and services to that land. And I don't mean the basics of water, sewage, electricity and communications.

Unless you are building a self contained city and none of these suburbs on the fringes are, you need transport networks, road, rail, public transport, to work etc. And all of that means added layers of cost. Cost to the developer, costs to government and cost to the new home buyer along with a lot of travel time to work and other services.

A lot of these costs these days are added to the developer who adds it on to the block of ground and therefore to the home buyer. As for transport networks governments these days are loath to invest in them until the development has reached a certain stage. No more putting in the transport networks up front.

And even when you do have these transport networks to the development people who buy there may have an hour or more to get to work. And that is only the start. Add the costs of car and maintenance, fuel, tolls of a hundred dollars plus and the cost of the house does not seem so cheap.

That is the thing with buying a house, you need to add all of your costs up including those of getting to work. And work is in all likelihood a long way a way if you are buying in greenfield developments on the fringes of our cities. And the answer can only be better planning including access to work closer to home.

foolking:

21 Apr 2014 12:08:02pm

A good article but isn't the critical point that the houses aren't being used for ..first housing people .. affordable rental. If tax incentives were stripped from negative gearing and applied to lowering the cost of rent, people saving to buy a house would have more money available.Someone from the Netherlands pointed out that over there that renters have way more stability built into their leases so housing security is not really an issue there.

Public/private land for the other living things and smaller more practical residences are critical and if these are the issues that melbourne beaurocracy is going slow ,good on them.

Evan:

21 Apr 2014 12:43:10pm

In Australia renters have few rights (you need to ask permission to use blu tack to put a poster on the wall - I'm not making this up and I'm not exaggerating. If you don't believe me ask to see someone's lease.) and little security (leases are commonly now only 6 months).

Jock:

21 Apr 2014 3:30:19pm

So what you are saying is it's alright for a tennant to deface paintwork in, what is after all, my property? There are reasons behind the vast majority of there rules, blu tac leaves a grease like stain on a surface when it has been there for an extended period of time, but hey, I'll just claim the cost of redecoration on my next tax return. On your other point regarding the length of lease, believe me when I say it's actually the other way around, I have dificulty in finding a tennant willing to accept anything other than a six month lease term, OK most of the time the lease rolls over into another six months, but believe me I would rather a tennant signed up for at least a minimum twelve months to start with. I think this blows a hole in your theory.

sidlaw:

21 Apr 2014 4:30:46pm

Evan,'Renters have few rights'.That's a rib tickler!Are you aware of how difficult it is to evict a tenant who has used blu tack on the wall without your permission? Of course eviction wouldn't arise over your facetious example of mere blu tack but for many other reasons there is a need to evict tenants including, unpaid rent, trashing the property, putting the back fence on the barqeque because they ran out of other sources of fuel, etc, etc. The law favours the tenant and when the landlord, after following all the correct procedures, is finally awarded by the court an enforceable eviction notice, two months have passed with no rent paid and the property is trashed. The tenant knows the timing and works it to their advantage then at the last minute moves out to another unsuspecting landlord, rather than being formally evicted.I don't have any rental property now, it's simply not worth the hassle.

Babyboomer64:

21 Apr 2014 12:19:38pm

Mmmmm, why can't we build houses on a not for profit basis. Public housing developments, that our kids can afford. Areas set aside where first home owners can have a go, without a strangling debt around the neck of their families. Where there is space for young families to play Where the dollar is not the bottom line. Is there a such a benefactor on this planet, or maybe such an ideal exists only in the unselfish, divine mind. I think thats what God might have in mind, and we'll find it in heaven. But wouldn't it be nice......... If I were a rich man... la la la la la lal

Caitlin:

21 Apr 2014 2:25:56pm

Sorry, we had that but we can't have it anymore.When the babyboomers were children, the state provided housing for blue-collar workers to ensure they had shelter and communities.When the babyboomers were growing, school milk programs were introduced to ensure they were all getting calcium. There were also schemes that meant private school fees were tax deductible so working-class boomers could try to rise.When the babyboomers left school, they had a multitude of new universities to apply to - UNSW, UTS, Macquarie... They couldn't all go but class sizes were kept small through adequate federal funding. Later on some of them experienced free tuition. And those that didn't go, went to well funded technical colleges. They could apply for positions with minimal experience knowing they would be trained rather than passed over for 457 workers.When the babyboomers reached the tops of their careers, they embraces neoliberalism and it's low taxation rates. After all, nobody had ever done anything for them, so why should they do anything for society?! There is no society, merely individuals.So no, we can't build low cost housing for young families. The babyboomers set us on a path where we now lack the taxation base to fund our schools and hospitals let alone anything else. Not to mention bringing in low cost housing would dampen the market and the babyboomers who paid for their houses on one income and have seen massive gains won't like those not being realised.

chriscomment:

22 Apr 2014 6:52:31am

All this resentment stuff about 'thems'. Whether it be the Evil Chinese Investors, the 'Selfish Baby Boomers. Like racism people don't get their facts straight. eg what proportion of foreign investment in Real Estate is from US, Canada Uk versus China? All people born in the post WW2 Baby boom aren't wealthy. It is in the power of the current Govt (Abbott and Hockey aren't evil Baby Boomers) to fix the housing problem through the tax system. Take away the incentives for houses to be a financial investment. It is all built around the tax system.That will help our current financial problems which are caused not by current Govt spending, but by falling income. Super contribution tax deductions also fuel the housing market , because DIY super funds can invest in property and pay minimal taxes. The problem is that the current Govt clearly won't do anything that impinges on the more wealthy in society. don't blame previous generations. They operated in a playing field available, just like every generation.Your beef should be with the current Govts both State and especially Federal who could fix this if they had the will. However with Tony Abbott's PPL to benefit the wealthy instead of using that money for childcare to benefit all, I don't like your chances - and I repeat Hockey and Abbott are not Baby Boomers.

foolking:

21 Apr 2014 12:27:43pm

Graham H: Well explained, i think you're mainly correct on negative gearing, I wonder if your idea on a one year capital gains exemption would work, probably overheat the market so it would need careful planning but an interesting idea, good one .

Evan:

21 Apr 2014 12:35:01pm

I will say the heretical: the market is to blame.

One solution. Get those dying without heirs to leave their home(s) to a trust that rents them long-term for the price of maintenance plus a margin to buy more stock. This ensures an ever-expanding supply of housing somewhat insulated from the market.

It is the only solution I know to deal with the problem - the market in an essential.

Jock:

21 Apr 2014 3:36:12pm

OK Evan, so who benifits from my inability to produce offspring? The government? I must admit I would be happy in the knowledge that I had worked all my days just to see the government benefiting from my death after they have continually screwed me royally whilst I was alive. Laughable mate, laughable.

MJLC:

21 Apr 2014 2:03:05pm

Part 1

"There is no doubt Australian property is overvalued"

Seeing that in the brave, new, unfettered world of Investisseureuses sans Frontiere (Investment Bankers without borders) means a house is simply just another thing you flog off to help you trouser some cash, I'm truly astounded the usual world of childish, right-wing thinking hasn't been brought to bear to help "solve" this intractable problem. Some examples;

(1) Any time Australian goods or services are said to be to pricey by world standards the obvious, sole issue is Australian wages. These people doing all this selling clearly have to take a pay cut, and a bit of lateral thinking should make this palatable - presumably they attend family reunions, some are probably in civil unions, I'll bet the plumbing pipework in their houses has unions as well as reducers, elbows, tees etc, so it shouldn't be too tough to tar them with a few broad brushstrokes as folk in need of a damned good slap-down.

(2) From what I hear, "regulation" and all sorts of coloured, socialist tape are killing this country. It's about time we went down the right-wing path and exposed this fiasco for what it is. If someone wants to build a house made out of plastic supermarket bags to sell to foreigners and not be inhibited by all this ridiculous talk of "proper foundations", "structural soundness", and this bizarre idea that roofs need to be constructed to stay on EVERY damned day, then we need to be with the "let the market rip" brigade on this one. The old days of viewing sand dunes, mountain slopes, and swamps as second-class housing opportunities are examples of just the sort of bourgeois, "entitlement" thinking conservatives are on this Earth to put a stop to.

DiogenesNT:

21 Apr 2014 4:06:38pm

Hi MJLC, I think you are taking the p*ss out of conservatives - I am not that bright today - post chocolate over indulgence!! In case I am wrong the next may, or may not be, relevant. In part (2) of you comment I think the flaw in the argument is in the first 4 words "from what I hear".

From what I read on this site this is a substantial part of the arguments put forward. That, and taking a single or couple of instances and extrapolating it to a broad generalisation. For example, "tenants have few rights" is a comment above. This is not true. There are laws governing the rights of tenants in every State and Territory in Australia.

Sidneysaid:

21 Apr 2014 2:04:05pm

There are a few estates where a I live that are simply out of my league price wise and most other ordinary people for that matter but we have to accept we don't have the money to live there. Sydney and Melbourne are now similar albeit larger areas that is also now unaffordable for average people. No news flash there.I don't believe that limiting foreign buyers and scrapping negative gearing will bring about a return of affordable housing for ordinary people, it may soothe some people's soul but it will not deliver. Those that have the money or have the ability to earn it will simply move in on any slack created as both cities are popular destinations.The only option for Sydney and Melbourne is for their respective governments to develop estates in areas as close to the cities as possible and build affordable housing themselves (not housing commission) and limit the sale to first home buyers only. The fact they have not bothered tells us something and I don't care which party it is, they both have the same level of disinterest.

md:

21 Apr 2014 4:55:10pm

Sidneysaid, there are more than just a few estates which are considered unaffordable based on the historical 3 times average wages measure. Ian Verrender says the average house is 4.5 times the average wage - I wish! In Sydney, the average house is 10 times the average wage, and in Melbourne it's about 9.

I think Ian is probably referring to the average household income i.e. two wages, and the average house probably refers to some place much further out than the average house used to be. It wasn't so long ago that anyone with a job could afford to buy something in a decent area, not too far from the city. It might not have been a flash house, but those blocks with the "not flash" houses on them now command over $1 or $2 million. Prices have risen much higher than wages have, and the whole thing is way out of whack, due to government policies.

I do not agree that limiting foreign buyers and scrapping neg gearing would not drop prices. With one stroke of a pen or even just a word from the government, prices could drop to more affordable levels. And if prices did drop, then guess what, investors would suddenly think twice about investing in real estate as way to easy guaranteed riches. Rental returns are quite low, so the only positive thing about property investment is the huge capital gains that have been made and are constantly spruiked based on past performance. If those capital gains were not so certain; and if the prospect of actually LOSING on property was on the cards, investors would look elsewhere. And if the government clamped down on foreign investors, desperate homebuyers would not have to compete on an uneven playing field, signing up to a lifetime of mortgage slavery for fear of missing out.

As for the government not showing any interest - people must understand that they have absolutely no interest in housing affordability because if they did, they would have to crash the market by popping the bubble, and that's not something they will ever do willingly.

Rob:

21 Apr 2014 2:39:58pm

"There is no doubt Australian property is is over values.It is equally true the market has been distorted by lax policies-with no tax on the family home and an open slather negative gearing policy for investors-that direct funding towards housing and deplete the a,amount of credit available for productive areas of the economy":The Australian banking industry has an unhealthy exposure to residential mortgages"As at February.outstanding mortgages on residential property stood at a colossal #1,275 trillion. Most of that money was borrowed offshore by our banks- the REAL source of our foreign deb problem.Not Government debt !!

And therein lies to problem- a problem which has been too long ignored by Governments hooked don free market economics. The fundamental cause if the of the economic and financial crisis that began in 2007 was lending by the finance sector that primarily financed speculation rather than investment in the productive areas of our economy-like manufacturing and SMEs

The housing boom may defy gravity but if the US-UK-Spain-Ireland and others are any guide- the fraud perpetuated by Governments in collusion with financial capitalism its chances of not crashing are not good.

If it does it will have to be at the expense of yet more shonky lending- more debt - more inequality and a more than even chance of the total collapse of the our financial system.What are the alternatives?

worried:

21 Apr 2014 2:46:14pm

Imagine what a great country this would be if everyone wasn't spending so much of their time servicing the debt on their overpriced properties. Its incredibly unproductive. If real estate was 50% of its current level, it would be possible to work less and have more leisure time and their would be more money to circulate through the economy. What sort of lifestyle do we want? Do you want to be flogged to death until you are 70 or see everyone actually enjoying their lives. We don't have to continue down the conservative stressed out path.

Artful Dodger:

21 Apr 2014 5:21:32pm

Hey worried: I think you have a damn good reason to worry.The US and the UK had an over valued property problem.

We all know what happened there- the boom went bust. Now the US has 47 million living below the poverty line- 44 million on food stamps and according to some analysts- 80% of them are facing poverty-the other 20% will get even richer.

In the UK- the number of people needing emergency food has gone from 2814 in 2004 to over 900,000 on 2013/4-over 4.7 million in the UK live in food poverty.

No- we certainly do not have to continue down the conservative, free market economics path but try convincing enough punters to think about new economic and social paradigms. Try to get them to think about the merging of new communications, renewable energy and nano technologies in a collaborative Third Industrial Revolution which could provide the life style you suggest.One must think they prefer the stress of slavery!!

kenj:

21 Apr 2014 8:45:10pm

You're right, Artful Dodger.

French economist Thomas Piketty has been making favourable impressions internationally with his claims about the emergence of a new financial oligarchy. He argues that by 2030 all appreciable global wealth will be held by a small oligarchy and most of it will be inherited rather than have earned. Piketty's detailed statistical analysis concluded that inherited wealth is the historical norm and that the kind of economic competition and striving that we popularly think of as capitalism is an aberration. Piketty also notes that modern financial capitalism insists on a return of greater than 5% while national economies traditionally only have an averaged growth rate of 2-3%. The end result is that national productivity growth and national assets have to end up with the wealthy classes who insist on the higher rate of return. He notes that since 2008 over 60% of US national growth profits have passed to the top 1% of Americans. Quite simply, they are taking everything. We have seen a similar feature in the US since 1970 with virtually all employee productivity increases (over 100%) passed to employers while wages have been held stagnant.

Piketty claims that the mechanism of capitalism is always destined to fail the broader society. It is a startling thesis and one extraordinarily unwelcome to those who think capitalism and inequality need each other. Capitalism requires inequality of wealth, runs the argument, to stimulate risk-taking and effort; governments trying to stem it with taxes on wealth, capital, inheritance and property kill the goose that lays the golden egg. Unfortunately, this fiction merely hastens the rush to wealth accumulation by a select few, a return to the historical norm.

While Piketty warns us against a rush to resuscitate an ailing and unworkable form of capitalism Abbott and Costello are insistent on the ridiculous fiction that the road to national prosperity lies in a scorched earth policy of austerity and poverty.

Artful Dodger:

22 Apr 2014 9:13:50am

Do you think Abbot/Hockey and many of the punters will read Piketty kenj?

Now if Shorten and the Labor-Union chiefs did,understood what he is saying, acted on it,included the people in the discussions and brought them along then we may have a chance.But I am afraid they are just as much prisoners of the corrupt and failing system as the LNP is.

That only leaves the Greens who need to modify their stands on asylum seekers and development to attract enough traction to make a difference.

Alpo:

21 Apr 2014 2:49:10pm

Hmm, I am not sure, the only thing that may be in over-supply in Melbourne for instance are probably one-bedroom apartments. Which are mainly concentrated around the CBD and are perfect for rental to tertiary education students. So, foreigners may invest in apartments in the CBD that are then rented to foreigners. This means that we need many more apartments and houses to be built, not only to boost occupation by Australians but also to boost purchase and investment by Australians. Otherwise limit foreign investment in real estate. Whatever it is done, though, it must be done piecemeal, step by step, in that way the bubble is deflated rather than burst.

Arthur:

21 Apr 2014 3:22:11pm

"A house is no more an investment than is a pair of trousers."John Locke.Lemme see if I have got the story right. We are all going to become rich, rich beyond our wildest dreams by flipping houses to one another?No? Myaybe we are going to make it big by stealing the kids' christmas presents by screwing young families with rents set to the maximum the market will bear.Australia, the land of the fair go indeed! An equal society. What other self-praise shall we slather upon this dung heap?

Nobody:

21 Apr 2014 3:32:38pm

Yes Ian. And the other side of the same coin is that as long as the ballooning property speculation industry dominates Australia's economy (along with the closely associated retirement and financial services sectors), investment and spending in production-based industries will remain depressed. That means skilled employment for all those young people who now can't afford to either buy or rent in the places were the jobs are, will remain stagnant. Just consumption, retailing and service sector jobs and a continuing squeeze on govt revenues and govt spending. Cities with run down, urban crime ridden no-go areas on the fringes for the cheap, menial labour. As Chalkie pointed out in the first comment here, it's been a strategy pursued by successive govts and either actively supported or passively accepted by the broad Australian electorate for many years. The US model that failed miserably in 2008 and that Rudd and Swan stupidly embraced with gusto for what they perceived to be electoral gain. Overdependence on house price/rent speculation comes with severe costs that will shape Australian society and physical landscape for many, many years and place tremendous pressure to foot the ballooning bill by chopping down, digging up, shooting and selling ever more of Australia's natural resources. That is where the real price for this zero output, ego driven, hubris will be paid. Poor feller my country, indeed.

floss:

22 Apr 2014 12:46:30am

Further to that, young people with degrees are highly valued in emerging economies. Our well educated IT professionals and engineers can easily afford to live well in Asia on the salaries they would be paid there.

Why would they stay in Australia and struggle with repaying university loans, as well as having to travel hours to get to work from rental accommodation that they can afford here?

Either we do something to make it possible for them to establish a home and family here, or they will do so elsewhere. The risk of losing our most capable sector of an entire generation is very real: we live in a global village now.

DiogenesNT:

21 Apr 2014 4:20:25pm

I rarely see any comments in articles on this site that mention the Northern Territory. A few facts. It is virtually to buy a house under $500K in Darwin. If it is lower it will require substantial renovations that will take it ell over the $500k. Rents are typically above $600 a week. If you want a unit that is clean and tidy it is around $450k and usually only has 2 bedrooms.

Families are up against it as developers usually only open new areas when everything in their current release is sold. There are also very few developers which restricts competition. Palmerston, which s only 20k away is in a similar picture. After that it is out to the rural areas where you are looking at glorified sheds and demountables if you want cheap rent. Cheap being $400 - $500 a week. Many are more that this.

The governments up here have virtually stopped developing public housing. There was a bed sit for sale a month ago for $480,000 in Darwin. I know we have a small population but we won't get big increases until governments of all persuasions take a long term view of housing. Most years the net Territory population increases are in the hundreds so the problem is not a big one to solve.

NotMyName:

21 Apr 2014 4:51:16pm

I asked both Julia Gillard and PM Abbott to consider removing negative gearing, as it has been the main reason that Australians are struggling with the increase to the cost of living due to the high cost of renting or buying a home; I don't believe the lie of low inflation. I didn't expect a direct answer as they were both to busy to reply to every email or letter sent to them, both gave me the courtesy of an answer from the treasury department. Considering both Labor and Liberal are at opposite ends of the political spectrum and disagree on all subjects, they are both on the same page when it comes to the five billion a year of taxpayer funded speculation for nearly three decades of negative gearing, both can't see the immorality of allowing a few to to benefit at the expense of the majority, and expect the victims to fund the speculation through their taxes. Both parties have great sympathy for the speculators, and consider it unfair that someone speculating on housing should have the same taxpayer support as those speculating on the stock-markets; they cannot see that allowing speculation to force up the cost of renting or buying a home to the catastrophic levels of today is immoral, and is totally against the reason we have elected political parties, who should be fair to all Australians and not the speculating few. If there is a bust in the housing market, those speculators with the money will come out on top at the expense of the majority.

Nobody:

21 Apr 2014 5:44:35pm

I believe individuals should be encouraged to pay for the costs of their own investments, something that poorer people are forced to do but that's optional for the political classes and their sponsors. Consequently, I believe that property landlords should be encouraged to run their rental properties as a business and not as a ratepayer and/or taxpayer subsidised asset price/rent speculation scheme. I don't expect other members of my community to pay for my brokers fees, or for the costs of buying and storing my gold, and I pay full capital gains tax on these things. So why should I be forced to subsidise the cost of other people's house price/rent speculation schemes?All fairly straightforward and non-partisan. Which raises the question: Why don?t political parties offer such things? And the answer: Too many snouts in the trough.

Graham H:

SJJM:

21 Apr 2014 4:57:51pm

There will never be a bust in Sydney. There will be up and down fluctuations, always with an upward long term trend, with the market now correcting for recent years of stagnant/ negative growth. As a negative gearer, it really isn't that lucrative with interest rates as low as they are. It comes down to either paying tax to the ATO or interest repayments to the Commonwealth Bank

Carolyn Rutherford:

21 Apr 2014 5:09:48pm

All those who call for abolition of negative gearing must be too young to remember when the Labor government did just that in 1986. Result? Investors shied away from property in droves, no new properties were built for rentals, and rent for existing houses and units went through the roof! The government was forced to re-introduce negative gearing eighteen months later. The price of property went up, not down, as people clamoured to buy because it was cheaper than renting. So be careful what you wish for. The property market is just that, a market, and as such, will always respond to supply and demand. Trying to manipulate it is fraught with dangers, as we saw in America. One thing I do know is that if you wait long enough, property is a good investment whether you live in it or rent it out. Just start modestly and give it time.

md:

Carolyn, as I said earlier to Peter the lawyer, I suggest you read http://www.smh.com.au/articles/2003/08/24/1061663676588.html?from=storyrhs

Rents did not go through the roof as you say. They rose (off a low base) in a couple of states, they fell in a couple of states and stayed the same in the other states.

The government was "forced" to re-introduce negative gearing through pressure from the real estate industry and the squeals grew louder as an election loomed closer. Prices went up after the 1987 stock market crash as investors piled into property as an alternative to shares.

"Trying to manipulate it is fraught with dangers." Well yes, you're right there. The Australian property market has been manipulated by successive governments who continue to manipulate it by propping up an artificially inflated bubble. Now they're too scared to stop manipulating it for fear of popping the bubble.

"... property is a good investment whether you live in it or rent it out. Just start modestly and give it time." Spoken like a true real estate agent or at least someone with a vested interest in having people buy at the peak of a bubble.

kenj:

21 Apr 2014 5:13:30pm

Ian Verrender acknowledges the possibility of a GFC2 type event but quickly dismisses the likelihood. The global derivatives exposure of the Australian banks is reportedly over $12 trillion, making Australian taxpayers and bank depositors incredibly vulnerable.

Under the Basel III provisions for handling global financial and banking problems -- which Australia has signed up to --derivatives obligations take precedence over all other bank creditors, including cash deposit holders. Signatories agree to bank 'bail-ins' whereby cash depositors become bank shareholders in the event of any global banking crisis.

These issues are not fringe conspiracy theories. The Guardian has run commentary articles on recent EU banking reforms and expressed similar concerns about Basel III provisions as being overly-weighted in favor of derivatives markets and against ordinary bank cash depositors.

The Australian government has agreed to accept up to $350 billion in mortgage related assets from Aussie banks if the global banking system fails. In this worst case scenario most of the banks' derivatives and international debt will be paid for by the Australian government against assets that will (under this worst case scenario) have tumbled dramatically in real value.

Why is there no adequate public debate on these key provisions of the Basel III protocols? Why should fiscally prudent Australians pay with their cash savings for any gambling losses made by the banks through their own risky derivatives trades?

Pop:

21 Apr 2014 5:20:42pm

Yes there is a way out of this speculative,non-productive, severely tilted services economy, of which speculation in investment housing is but a symptom of the decline in Western economies across the world. There are many things the government can do to allow wage earners and savers to own a house and not have a 30 year mortgage ( mortgage means 'until death' by the way). Whether it be incentivising savings, taxing speculation or even controlling private corporations and banks from holding and controlling land and speculative investment e.g. 'Huge Land banks' held by big developers who hold land and release land lots in there thousands to maximise shareholder benefit.

Our federal government however, does not have the will to commit to any so called reform. More over it does not control retail bank operations, the land, the resources underneath or dare I say even the tax system where the super rich and 'flash boys' dodge and weave without any real international policing or meaningful penalties.

Full steam ahead for speculative foreign investment, tax havens and 'transfer pricing'. Full steam ahead for high risk financial trading. Get another credit card, banana republic here we come!

kenj:

21 Apr 2014 6:35:11pm

In other words, the taxpayer is providing an inefficient and massively expensive subsidy to private investors in order to obtain some rental for the general public. So why not simply drop the negative gearing tax deductions and have the government use the savings to build public housing? The current arrangement if an incredibly inefficient means of delivering affordable public housing. It also provides an expensive windfall to one particular class of investors and ties up national investment funds in an artificially inflated market.

Drop the negative gearing tax benefits, let the house prices fall, use the public money better elsewhere and go back to building public housing.

Peter the Lawyer:

21 Apr 2014 9:12:55pm

Public housing is another distortion of the market and is ripe for inefficiency and waste. It is also philosophically unsound for people to rely on government for their shelter. That leads to dependency and then to the idea that we are here to serve the State rather thn the other way around.

Remember too the States own government housing, not the Commonwealth, so you can't guarantee that commonwealth tax increases would flow to more state housing ghettos.

Removing the deducions for interest on real property would be a very complex thing to do. WHat about commercial property? What about positively geared investments? What about over types of assets that are negatively geared?

Make no mistake, such an amendment would be a tax increase, just as would occur if the government decided that too many working class people were ripping of the ytem by making fraudulent work expenses claims and banned those.

Arthur:

21 Apr 2014 10:45:22pm

Why is a sheet of galvinised iron over our heads so expensive?Some people are so invested in their models that the Capitalist system is the only way to go are incapable of thinking outside the square.And you don't even need to think. You just need to travel a bit.We allow private institutions to create money out of thin air. That is what happens when you get a loan from the bank. And then we mandate that they must maximise the return to their shareholders (Polite speak for screw everyone to the maximum amount that the market will bear).And this is the best that we can do?Why is there a shortage of land in Australia? How far is it from Perth to Sydney? (Hint: Take a cut lunch.)Who on earth says that thatch is not a viable building material? Why do we insist that houses are built of ticky-tacky?Why do we insist on a carefully manicured patch of lawn? Has anyone worked out the man-hours dedicated to mowing it? The fuel cost? And what is it with the white picket fence?The Left brain is living in a hall of mirrors. There are an infinite ways of rearranging our affairs but for the inability to break out of the hall of mirrors.

md:

NotMyName:

21 Apr 2014 10:29:48pm

Hello SJJM the threat of doom if we remove the status quo that suits minorities has been used time and again, time to call the bluff on the lie of economic chaos if negative gearing goes, our lazy MPs' will have to get off their backsides and do their job, meaning legislation for all not for their donors' or themselves; no wonder new or focused parties are succeeding in winning seats at recent elections. I was lucky to have been an indentured apprentice to a Free Mason, the Free Masons' where I came from didn't take on apprentices as an act of kindness, it was to ensure that their was a pool of tradesmen they could rely on and keep control of the local workforce; today I talk to apprentices of all trades, and they do not have any security until they finish their apprenticeship, and many have to rely on their trade union to find work for them to finish their apprenticeship. The politicians of all parties don't seem to understand that when an industry closes in a country all the past expertise is lost, no more passing on of skills and work ethics, and an increasing reliance of overseas temporary workers. Lets stop spending taxpayer money on damaging and not successful speculation and invest in training young Australians' for our future needs.

JamesH:

21 Apr 2014 6:15:52pm

It will one day and I hope it is those overseas investors that get burnt for diving our Australian housing market out of control from the rank and file low paid income earners of Australia. In reality I hope our Australian low paid rank and file suffer from the greedy investors.

Andrew Smith:

21 Apr 2014 7:23:52pm

The real estate media and others are misleading when using 'net population' growth or 'immigration' figures when temporary residents of younger generation make up this so called 'growth' (viewed negatively by many).

A distinction should be made when one considers that the overall majority of 2nd year foreign backpackers, international students etc. will be neither buying property nor becoming permanent residents or citizens..... but leaving, like many younger Australians.

However, there is a story in the population related to real estate, the majority of property investors and baby boomers needing to downsize are part of Australia's permanent or native population base (not including temps) which is declining, ageing and will need to liquify their property assets.

Aussie Sutra:

22 Apr 2014 7:28:54am

I think you'll find that officially at least, those Chinese parents who put on child in an Aussie university are allowed to purchase an Australian property. Unofficially of course, since there is no supervision of the rules anyway, it's a free for all.

Expat:

21 Apr 2014 8:43:58pm

It is indeed interesting that an Australian citizen cannot buy property in China for example but Australia is willing to sell its land to Chinese citizens. There is a reason the Chinese will not sell their land and soon the land in Australia will be majority owned by foreigners who even get tax breaks for doing so.

H.Z:

21 Apr 2014 11:04:34pm

It is quite a intriguing phenomenon that properties are overvalued in many parts of the world. Real estate market looks like to be demand exceeds supply, but the reality is that properties are over supplied. There may have a connection between Triguboff deciding to retire and visiting China. It seems like in China, the price of property is in a comparatively unstable stage. Some cities are keeping the price, but for other cities, fluctuation is considered apparent in some people's eyes. The rick of the bubble bursting is there, even knowing how low the possibility is. It is a market deserves attention, we could say.

Paul Taylor:

22 Apr 2014 6:54:09am

Ian, as you infer the greatest risks to Australian national sovereignty are net foreign debt ( total of government, private business & personal debt minus what foreigners owe us) now in excess of A$2 TRILLION & an unhealthy & growing reliance on raw material exports, primarily to China.

Most people are unaware that private debt actually reduced by 15% of GDP over the period of the Global Financial Crisis (GFC), primarily because of the lowest interest rates in decades, recovery of superannuation & stock market investments & maintenance of relatively strong employment...instead they are conditioned by the Coalition to concentrate on the increase in Federal government debt of 11 to 12%.

There are three ways to bring the federal budget back into surplus apart from a strong global economic recovery & that is through new structural revenue creation, structural expenditure cuts to spending or a combination of both.

You boost housing affordability not by reducing wages & conditions, through massive cuts to family entitlements or a lack of employment opportunities but rather in creating long term, well paid , full employment opportunities accompanied by a stronger, more resilient diversified economy.

You do not allow Free Trade Agreements ( FTA?s) with South Korea, Japan & China to destroy your manufacturing base for starters. Instead value add iron ore, coking coal & gas 3 fold with the privately funded A$45 billion Project Iron Boomerang...to produce the cheapest high quality slab steel in the world; exporting to multiple countries & not just China with cost savings for local manufacture. In so doing you integrate, interconnect & interrelate rail infrastructure in the North of Australia with the South & create greater industry diversification. Instead of fly in fly out you create a permanent residential community of 20,000 houses at Abbot Point QLD & an equivalent number at Port Hedland WA. It is not a case of either choosing between business investment or housing investment....investment funding is optimized with a combination of both.

Ian, based on your analysis, I agree that we should start limiting negative gearing on property to new developments only.

Paul Taylor:

22 Apr 2014 6:54:56am

Instead of a 2nd international airport for Sydney at Badgerys Creek build a high tech, innovative, eco friendly satellite City of the Future that offers a greater propensity for high paid wages, living conditions ( without added noise & smog pollution that lowers the value of housing), overall quality of life & high value add exports...a satellite city that values education & skills training; incorporates science & commercial business R&D with co investment & collaboration from Asian countries. Japan for example has decades of experience in building such cities...all in a quality mixed environment that values natural attributes. What business would not want the Federal Government gold plated AAA international credit rating on wholesale borrowing: the big 4 banks doubled their profits at the height of the GFC with access to the governments credit rating & the federal government in turn earned $4 billion in fees. If you are the federal government you already own the land at Badgerys Creek & have the highest possible credit rating with the lowest interest rate on borrowing, so if you are the government why not develop in stages & commercialise one stage before you go onto the next...park borrowed money with the Reserve Bank of Australia (RBA). In the end the government generates a healthy profit that can be reinvested in rail & road infrastructure that links with the Central Business District, the 1st international airport at Mascot & the 2nd floating international airport out to sea off Port Botany ( look at the proposed Gensler designed London Britannia International Airport in the Thames Estuary as a replacement for Heathrow) & another major iconic structure for Sydney ( without noise & air pollution impact on the Sydney Basin) on a par with Darling Harbour, the Opera House & Sydney Harbour Bridge.

Zany:

22 Apr 2014 7:11:02am

Until the federal govt addresses investment welfare on housing , the prices in capital cities will escalate. Getting rid of negative gearing should be a priority for any sensible resolution to the housing shortage. Property pimps should be up on notice that negative gearing will be no more otherwise the liberals cut backs are just a farce.

Graham H:

Bah, humbug:

22 Apr 2014 9:18:53am

It always bemuses me to read the likely effects of removing negative gearing advantages from investment in property. Either social justice will be served and a huge anomaly removed from the tax system (and there's something to be said for this view) or the sky will fall in (the Chicken Little investors). While a bit sympathetic towards both sides of the issue, the fact is that Oz's almost unique advantages given to property investors do distort the tax system and we all pay to assist them accumulate flats,apartments, and houses, by handing them tax revenue that could otherwise be more gainfully employed elsewhere. Yet no-one seems to seethe obvious solution. Don't remove negative gearing completely in one hit; set a limit of perhaps $500K for claimable borrowings, non-indexed, and from a set date (say, 12 months out), have it apply to new dwellings only. That way, existing investors aren't unduly penalised but the system is slowly unwound with little shock to the market. Over time, the distortion to the tax system caused by negative gearing would recede and gradually disappear.

Victoria's laws for disclosing political donations have long been criticised as among the weakest in the nation, but Premier Daniel Andrews says his proposed reforms will make the state's donations laws "the strictest donation laws in the country".